The current equipment profile of the Indian Armed Forces has been a matter of serious disquiet to all those who are concerned with national security issues. Many wonder if India possesses the necessary punch to safeguard its national interests. Articles appearing in the press indicate a requirement of 100 billion dollars and a time span of 10 years before a semblance of balance can be achieved. Why have matters been permitted to drift to such alarming levels? Who is responsible for the current state of affairs? By jeopardizing national security, India has been rendered a ’soft state’, as amply proved by the sheer audacity of the Mumbai terrorist attack of November 2008.
Funds have never been a problem. The Government has been making adequate allocations to the defence. The Ministry of Defence (MoD) has been surrendering funds. Despite the fact that the services carry a long list of items urgently required to fill critical gaps, no major proposal appears to be getting fructified. A close examination reveals that major impediments to the modernisation of the armed forces are Defence Research and Development Organisation (DRDO) and the defence public sector. They make a lethal combination that effectively stalls all equipment procurement proposals.
Very often the services are given only one option ““ “˜take whatever the public sector offers or do without it. In a way, the public sector has contributed directly to the current state of affairs where the armed forces are saddled with mediocre and outdated equipment.
Earlier, no procurements from abroad could be carried out unless DRDO, which was a member of all sanctioning boards, accepted that the product could not be produced/developed in the country in the required time frame. DRDO was always wary of conceding this for two reasons. One, it reflected adversely on its research and development competence, and two, every new project meant an opportunity to expand its own domain with the associated budget. There has hardly been any equipment which DRDO has developed in the promised time-frame and conforming to the formulated parameters. In almost every case, it was only after years of failed trials that DRDO reluctantly allowed the services to resort to imports. It has been a history of false claims, tall promises, unexplained delays and sub-optimal products, thereby forcing the services to live with huge voids.
Defence Public Sector and its Hegemony
The Indian defence public sector consists of nine public sector undertakings and 39 ordnance factories. Despite getting preferential treatment through the patronage provided by the Department of Defence Production (DDP) in MoD, they have singularly failed to keep pace with technological developments. They thrive on assured orders from the services and periodic infusion of transferred technology. No indigenous competence has been developed. Most unfortunately, the Indian military is a captive customer of the public sector and is forced to buy what it produces. Very often the services are given only one option – ‘take whatever the public sector offers or do without it’. In a way, the public sector has contributed directly to the current state of affairs where the armed forces are saddled with mediocre and outdated equipment.
In all cases where technology is purchased for subsequent production within the country, a public sector entity is nominated as the recipient even if a private sector company can manage production by receiving only incremental technology. At times the technology is totally alien to the nominated public sector entity entailing long delays in its absorption and subsequent production.
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The public sector is adept at taking preemptive action. Being a part of MoD, it gets to know the military’s likely projections of equipment acquisitions in advance. Armed with this information, it promptly signs and MOU with foreign vendors to forestall competition from the private sector, thereby presenting a fait accompli to the decision makers. Once orders are in hand, it displays no urgency in delivering quality goods in the promised time frame.
To illustrate the clout that the public sector enjoys to guard its exclusive turf, the case of Tactical Communication System (TCS) has been discussed in detail herein. It is indicative of the extent to which the public sector can go to retain its monopoly. Although, promotion of ‘free competition’ is one of the stated objectives of the much touted defence procurement procedure, every subterfuge is being used to award the contract to a public sector favourite underhandedly by eliminating competition.
Tactical Communication System
There is an urgent need to put in place a system which can handle communication requirements (voice, data and video) of a field force in the Tactical Battle Area. The current system called Army Radio Engineering Network (AREN) is totally outdated. TCS is a force multiplier and the current void can result in grave consequences.
A case for replacement of AREN by TCS was initiated way back in 1996. Initially, TCS was proposed to be an upgrade of AREN and a case was processed accordingly. After five years of bureaucratic travails, in 2001, MoD directed that the project be taken up as a fresh procurement proposal. Accordingly, the Army Headquarters (AHQ) initiated the case and obtained Acceptance of Necessity. Under the provision of the defence procurement procedure, the case was categorized as a hybrid of ‘Buy and Make’ and ‘Make’. It was stipulated that the first two systems would be imported and the balance manufactured in India with imported technology. The latter ‘Make’ part of categorization related to indigenous development of secrecy and Network Management System by DRDO.
The case took another turn in November 2007 when it was proposed to recategorize the proposal as ‘Make (Hi-Tech)’ under the newly issued ‘Make’ policy as a part of Defence Procurement Procedure – 2006 (DPP-2006). Here a word about the new ‘Make’ policy would be in order. As per the policy, development of all strategic, complex and security sensitive systems are required to be undertaken by DRDO while projects entailing high-tech complex systems would be identified as ‘Make (Hi Tech)’.
‘Make (Hi Tech)’ projects would be based on proven or matured technologies where fundamental research is not required. The policy unambiguously states that both public sector undertakings and private sector companies are eligible to participate in ‘Make (Hi Tech)’ cases on a level playing field.
In a move smacking of gross partisanship and in total violation of Government’s own policy, TCS was surreptitiously categorised differently. In a pre-emptory move, a Defence Public Sector Undertaking (DPSU) was nominated as the sole design and production agency and the private sector was totally eliminated. The old practice of favouring public sector was continuing, belying Government’s often repeated claims of opening the defence sector to private companies.
‘Make (Hi Tech)’ policy clearly lays down that a duly constituted Integrated Project Management Team (IPMT) under the Acquisition Wing would shortlist a minimum of two Development Agencies (DA) after inviting Expression of Interest of participating vendors. Thus, in the said case of TCS, both the spirit and the provisions of the policy were violated in a blatant and brazen manner.
When the private sector came to know of the above subterfuge, it cried foul and appealed to the top MoD leadership. It demanded that it be given a fair chance to compete on a level playing field and whosoever emerges best should be selected. Defence Acquisition Council (DAC) appeared inclined towards open competition. Realising that the DPSU may have to face competition, DDP came up with another innovative stratagem. It demanded that a committee be constituted to carry out a feasibility study of the Indian industry’s competence to develop TCS.
Another exasperated officer went to the extent of saying that DDPs intransigence smacks of unpatriotic and anti-national behaviour. “How can officials deny modern systems to the services for purely partisan interests? I wish the national leadership takes notes of such negative elements and takes action against them.”
It was a totally unwarranted demand as a number of market scans had already been carried out and it had been well established that the Indian industry possessed adequate capability. In any case, competence assessment of participating vendors is required to be carried out by IPMT after the formulation of Project Definition Document. The sole aim of DDP was to delay the whole process till the existing DAC was replaced by a more pliable DAC after May elections.
Notwithstanding total irregularity of DDP’s demand, a multi-disciplinary committee was constituted on 22 January 2009 to carry out feasibility study. A representative of DDP was also made a member. As the services were keen to expedite the process, the committee held its first meeting on 04 February, wherein modalities of carrying out feasibility study were finalised. It was decided to request both the public and the private sectors to make presentations of their competence to enable the committee to conclude its finding. Consequently, detailed presentations were made on 11 February and the committee unanimously concluded that both the public and the private sectors possessed necessary competence. It was decided to meet on 17 February to sign the report.
When the committee met on 17 February, representative of DDP sprang a surprise by demanding that the committee should visit companies to see their competence on ground before finalising its recommendations. Apparently, he had been directed by the officials of DDP to stall conclusion of the committee’s report. The committee decided to satisfy DDP to obviate subsequent questioning. Hurried visits were organised to different private sector facilities at Pune, Mumbai and Bangalore. Ground visits further reinforced the committee’s findings as regards the competence of the private sector.
The committee met on 04 March and draft of the final report was approved. As no issues were raised, all members were asked to meet the next morning to sign the report. But DDP was not done as yet. Its representative declined to sign the report. Continuing with its delaying tactics, DDP now demanded that a few more private sector companies should also be visited and cost benefit analysis of adopting ‘Make’ route should be carried out. Such a flagrantly outlandish conduct of DDP surprised and shocked even those who are familiar with its past track record. Interestingly, DDP has not empowered its representative to sign the report without reference to DDP functionaries, thereby stalling progress.
The Current Status
Through its clever delaying tactics, DDP has been able to derail the whole process indefinitely. The stand taken by the nominated DPSU is totally unreasonable to say the least. It claims that it is the best in the country and has invested huge resources in creating the test bed, yet is mortally scared of competition. It wants TCS project through the back door and not in an open, transparent and equitable environment. Very rarely one comes across behemoths which suffer from such a sense of insecurity. Apparently, the DPSU lacks confidence in its own capability to win the contract on sheer merit and is trying all tricks to eliminate competition – even seeking the help of its trade union to pressurize the Government.
Requirement for TCS was initiated in 1996 and today, after 13 years India is still to take the first step. DDP has made its stance clear that if TCS is not awarded to the nominated DPSU and it is asked to compete, DDP will not let the project proceed, whatever be the degree of desperation of the services to acquire the said equipment. Surprisingly, the higher leadership of MoD appears helpless and reconciled to the tantrums thrown by the predisposed elements of DDP.
As regards the past track record, the designated DPSU has acquired notoriety for time and cost overruns. When asked to provide time and cost details of completed projects during its presentation, the DPSU’s reply was a juvenile exercise in dodging the real issues.
“The Indian military will continue to be dumb and deaf in the battle field. Given our current communication system which is archaic, we will not be able to exchange voice, data and video. I wonder if the mandarins of DDP understand the damage they are doing to India’s defence potential,” commented an officer.
Another exasperated officer went to the extent of saying that DDP’s intransigence smacks of unpatriotic and anti-national behaviour. “How can officials deny modern systems to the services for purely partisan interests? I wish the national leadership takes notes of such negative elements and takes action against them.” “How can officials get away with actions which are inimical to national interests?” he wondered.
MoD continues to play favourites, brooking no challenge to the monopoly of an inefficient, insecure and inapt public sector. All efforts are made to thwart attempts of the private sector to get an equal opportunity.
The services want the best equipment in the given time frame. Therefore, they prefer competition and want the most competent entity to get the contract. As regards the private sector, it seeks an equal opportunity to compete and does not grudge a public sector company winning the contract if it emerges the best. It is a very fair and reasonable demand.
The Way Forward
The Defence Minister has been expressing his unhappiness at the slow pace of modernization. TCS presents itself as a study case for MoD to draw lessons and introduce corrective measures. Policy statements and frequent assertions mean nothing unless followed by honest ground implementation. As seen in the case of TCS, a mockery has been made of the much touted ‘Make’ policy. An impermissible new categorization, ‘Make by DPSU’, has been fraudulently introduced to favour the public sector. The Government’s claims of providing level playing ground to both public and private sectors have been belied. TCS case has certainly raised questions regarding the Government’s sincerity and dented its credibility.
MoD continues to play favourites, brooking no challenge to the monopoly of an inefficient, insecure and inapt public sector. All efforts are made to thwart attempts of the private sector to get an equal opportunity. As has been the history, the public sector continues to thrive on patronage, monopoly and captive customer base. Adverse effects on the fighting potential of the services appear to matter little to the protectors of the public sector. As a dismayed expert observed, “It appears that the survivability of an inefficient public sector is being given precedence over national security.”
“Either the Government should stop claiming equal treatment of public and private sectors, or reign in its errant officials who make a mockery of its policy”, stated a private sector functionary. “We have been taken for a ride. Trusting Government’s repeated assertions of fair play, we have invested heavily in technology and infrastructure. However, nothing has changed on the ground. Every major project continues to go to the public sector and we are left looking for left over crumbs,” he added.
Private sector should also be considered for the receipt of imported technology. In many fields it is far ahead of the public sector. Therefore, it is in national interest that the most suitable company be selected to receive technology.
If the Government is serious about according equal status to the private sector, it should initiate the following steps immediately:
As DDP’s sole charter is to sustain monopoly of the public sector by keeping the private sector out by all means fair or foul, it should be abolished and replaced by Department of Defence Industry (DDI). DDI should be tasked to look after the interests of the Indian defence industry as a whole. Officials of DDI should possess breadth of vision to view all issues in larger national interests, rather than in narrow parochial and blinkered manner as at present. A dedicated Joint Secretary should be detailed to facilitate entry of the private sector.
Private sector should also be considered for the receipt of imported technology. In many fields it is far ahead of the public sector. Therefore, it is in national interest that the most suitable company be selected to receive technology. This will save considerable time and resources as only incremental technology may be needed to be purchased.
Private sector associations (viz. CII & FICCI) should also be represented in categorization committees and DAC, albeit within the constraints of security considerations. Potential of private sector should be exploited by treating them as partners in progress rather than as a threat to the public sector. Their prowess should be considered as a national asset.
A mechanism should be put in place to redress grievances. In case an entity feels wronged by a partisan and subjective decision, it should be able to seek immediate relief. Disciplinary action should also be initiated against delinquent officials.
There should be an institutionalized interface between MoD, services and the private sector for regular interaction at the policy making level. Such a platform will go a long way to promote mutual confidence and remove unnecessary irritants.
The private sector was delighted to hear Defence Minister Pranab Mukherjee declare publically in New Delhi in June 2005, “The Government is committed to the development of a vibrant and proactive defence industry in India. It should be ensured that the available capability, infrastructure and resources, including intellectual capital, are harnessed to the fullest extent as our national assets and optimally utilised in achieving this objective.” He further advocated a strong and healthy partnership between the public and private sector for enhancing the defence capability and in sustaining a powerful domestic industrial base for the future.
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Undoubtedly, the public sector possesses excellent infrastructure, manufacturing facilities and a highly experienced task force. Unfortunately, due to its monopolistic pre-eminence it has failed to keep pace with the latest technology, managerial practices, marketing skills and financial management. It is fully aware of its weaknesses and knows that it cannot survive in an open competition with the private sector. This sense of insecurity makes it wary of the private sector and it tries all stratagems to block its entry. The Government has to realise that both public and private sectors are national assets and harnessing of their potential is essential if India wants to achieve self-reliance in defence production. It should not play favourites and treat both as equal partners in progress.
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